Options Corner: LULU's Lasting Tariff Pressure

Core Insights - The consumer discretionary sector, represented by the XLY ETF, has shown flat performance year-to-date, while Lululemon has experienced a significant decline of approximately 53% [2][3] Group 1: Market Trends - The apparel industry is facing challenges, particularly due to tariff effects impacting performance across various companies [3] - Lululemon's stock has been rangebound, with recent lows around 159 following its last earnings report [3][5] - The stock is currently near its lowest levels since 2020, with critical support identified around 168 [5] Group 2: Trading Strategy - The options market is pricing in a significant one-day move of about 10.5%, equating to approximately $20, indicating high implied volatility ahead of the earnings report [7] - A proposed trading strategy involves an unbalanced put butterfly, which allows for a credit position while providing a potential profit if the stock hovers around the 175 level [9][12] - The break-even point for this strategy is set at 166.50, with a maximum loss of about $1,650 if the stock falls below 150 [10][11]